The Emles Made in America ETF (AMER) seeks investment results that correspond, before fees and expenses, to the price and yield performance of the Emles American Manufacturing Index, an index designed to provide exposure to U.S. equities, predominantly companies headquartered and focused on the production of goods within the U.S.
Performance summary of Q3 2021
For the quarter ended September 30, 2021, Fund positions delivered -4.58% at NAV versus a benchmark return of -0.02% by the Russell 1000 Pure Domestic Exposure Index over the same period.
- Contributors: Tysons Foods, General Dynamics, Atkore
- Detractors: Building Products, Steel, Food Products
- Outlook: Supply chains, among other factors, remain a headwind to manufacturers and suppliers that rely on the timing of their clients’ conversion cycles to realize recurring revenues.
Quarter in review
The Fund underperformed its Russell 1000 Pure Domestic Exposure benchmark over a quarter where peak inflation and supply chain challenges bore consequences to manufacturing names that rely on stability of labor, supply, and distribution resources.
Investors shrugged off supply concerns as consensus EPS estimates for General Dynamics increased 4.93% over 3Q2021—largely driven by projected manufacturing revenues from FY2022 Defense Budget awards across Shipbuilding (Submarines) and Ground Transport categories.
Valued at approximately $700 million, Clearwater Paper Corporation delivered 32.3% price performance in 3Q2021 as the paper goods manufacturer reported 6.8X estimated EBITDA, and reinforced 3Q2021 growth expectations for its tissue business. Projected inflation impacts to overall raw material costs are expected to be largely offset by price increases to the company’s sustainable alternative to traditional paper cartons.
As labor markets remain in flux, there are many factors to the success of American manufacturers. We believe that the mid-quarter reversion of ISM’s Manufacturing PMI is a fair signal that US manufacturing revenues may benefit from a pickup in domestic manufacturing activity. As we await the results of Biden’s infrastructure bill, we remain optimistic that new spend will benefit names in material and industrial sectors.